Over 11% inflation likely in June: IEG

A think-tank Institute of Economic Growth (IEG) has said that the inflation is likely to rise to over 11 per cent in June from 10.16 per cent in May and the RBI may have to take monetary action to tame it.

The Whole Price Index (WPI) inflation figure for June is slated to be released tomorrow.

"The WPI forecast is 11.12 per cent for June...The RBI is slowly withdrawing from its low policy rates regime and the trend is going to continue, given the inflationary pressure in the economy," IEG said in its monthly bulletin.

It further said that the inflation was likely to continue in double digits till July before declining in August.

The inflation is expected to be at 10.97 per cent in July and 9.54 per cent in August, IEG said. It added that inflationary expectations would continue to be high as growth in food prices are not declining much and the growth momentum in the economy is not picking up.

Driven by spiralling prices of essential items, inflation surged into double digits at 10.16 per cent in May, the highest in the last 19 months.

The inflation stood at 9.59 per cent in April, according to the provisional estimate. The final figure is expected tomorrow.

The final inflation estimate during March was 11.04 per cent, up from the provisional figure of 9.90 per cent.

To tame inflation, the Reserve Bank raised key short-term policy rates by 25 basis points in an unscheduled announcement earlier this month. Also, it had increased the repo and reverse-repo rates by 25 basis points in April.

The Reserve Bank is slated to come out with its quarterly monetary policy on July 27.